Professional Liability
- Malpractice: Physicians and Errors and Omissions exposures for professionals
- Attorneys, insurance agents, accountants, etc
- Directos and Officers (D&O)
- Fiduciary Liability
Claims
- Written on claims basis
- Usually include a condition allowing insurer to settle out of court without policy holder’s consent (Ergo Clause = Defend Reputation) - Emotional
- Self Insured retention ($10,000) or more is often included in policies but rare for liability
- Other factors include market trends (accounting scandals), job market, and local trends
Why rare for self insured plans to liability?
- Professionals are more aggressive and better with management
- Have deeper pockets to absorb costs
- One of few liability polices that have deductible
Underwriting Professional Liability
- Medical Malpractice
- High risk: specialists, anesthesiologists, neurosurgeons, OB-GYN
Professional Liability Underwriting Considerations
- Years in practice
- Education
- Professional Reputation
Specialty Influence on Professional Liability Underwriting
- Usually represents higher risk in other areas as well
- Lawyers, accountants, insurance Agents
Insurance Agent and Broker (E&O)
- Failure to properly advice client of their insurance needs
- Failure to obtain insurance for client in timely manner
Failure to renew policy at expiration without giving prior notice - Faulure to advice client of policy limits
D&O Liability
- Covers Corporation’s D&Os against liability
- That is not covered by CGL or auto
- Usually tied to company decisions that adversely impact financial performance of from (stock price)
D&O Exclusions
- Libel or slander
- Gaining Personal Profit illegally
- Acts of deliberate dishonesty
- Liability under ERISA
Excess and Umbrella
- Purchased to extend limits of CGL, auto and other liability coverages
Why Excess and Umbrella Needed?
- Black Swan: Rare and expensive Claim
Excess and Umbrella: Maximum Probable Loss
- (MPL)
- Absolute Loss Possible (Regardless of Loss)
- Easier to estimate for property
- How Much? What is it Worth?
- What costs to rebuild?
- No comparable way to estimate MPL for Liability Coverages
Coverage layers
- In Property: high loss exposure can often be covered entirely by one insurer
- High LOL is usually arranged in Layers
LOL Coverage Layers
1) Primary Coverage
2) Excess Coverage
- Less expensive as coverage increases
Excess and Umbrella Needed When?
- Damages exceed occurrence limit
- Aggregate is reached
- Only usually come into play when underlying policy is exhausted or has reached its limit
Excess Policies
- Increase LOL on underlying policy
- Does not broad coverage (unlike umbrella)
- Usually written on a layered basis
- Severity, not frequency is the issue (similar to umbrella)
- Mostly medium to large businesses
Excess Policy Underwriting Considerations
- Often individual case is not underwritten
- Broad characteristics/Considerations like catastrophic exposures considered
Excess Policy “Following Form”
- Less likely to happen
- More confident because other companies are confident
- “underwriting other companies)
Umbrella Policies
- Large low frequency policies
- Usually does not provide primary insurance
- Provides excess coverage above liability limits on a n underlying policy
- Can drop drown extra coverage (excess does no
Underlying Limits on Umbrella Policies Not Maintained?
Policy still only responds as if those limits are in place
Umbrella Cheaper than Excess for what size business?
Small business
Umbrella Market
- High net worth individuals
- Businesses
- Both most common purchasers of policy
